1 min read.Updated: 19 Jul 2021, 03:02 PM ISTLivemint
Retail assets in Indian sustainable funds nearly tripled to ₹11,970 crore at the end of 30 June against last year, while such funds gained 27% since the start of the year
Indian funds based on environmental, social, and governance (ESG) investing philosophy garnered a mere ₹26 crore during the June quarter as incremental flows into existing funds remained muted, according to a report by Morningstar India.
In comparison, such funds witnessed net inflows of ₹1,200 crore in the March quarter and ₹3,750 crore in the December quarter of 2020.
In a major positive, the report highlighted that retail assets in Indian sustainable funds nearly tripled to ₹11,970 crore at the end of 30 June against last year, while such funds gained 27% since the start of the year.
“The coronavirus pandemic has led to a marked increase in investor interest and fund launches for sustainable funds globally. While the Indian sustainable fund market is still in its nascency, we witnessed a similar trend, too," Morningstar India said in a report.
As many as six ESG funds were launched in the year to 31 December 2020, with as many as five launches in the last quarter of 2020. The first half of 2021 witnessed three sustainable fund launches, including two feeders into global sustainable funds.
The report highlighted that while some part of the exponential rise in assets was due to the increase in market value, a significant share was due to fresh inflows into funds, especially into new fund launches.
“While initial fund launches have attracted significant interest and flows, continuing flows come through in sustainable funds post launch were missing," the report said.
India has so far 11 sustainable funds and the market is quite concentrated. The top five sustainable funds account for 86.5% of the overall sustainable assets.
There are eight actively managed environmental, social, and governance funds, one passive ESG exchange-traded fund (ETF)/fund of fund (FoF), and two global sustainable feeder funds. Active funds account for 93.5% of the overall sustainable fund assets under management.
According to the report domestic Indian equity sustainable funds rate well on the Morningstar Sustainability Ratings.
“Domestic Indian equity sustainable funds rate well on the Sustainability Ratings within their global category (Indian equity), with seven funds rated as High (5 globes), one fund as Above Average (4 globes), and one fund as Below Average (2 globes). 84.7% of the overall sustainable funds by assets have a Sustainability Rating of 5 globes," the report said.
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